In the Region / New Jersey; Jersey City Seeing Riverfronts Activity

Published: May 30, 1999

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As New York rents increase Jersey City's economic advantages have become more attractive. There is no corporate occupancy tax and while asking rents in the best building have inched up to an average of $33 a square foot a year they are still lower than those in Manhattan, which average $47 a square foot, but climb to $61 in prime midtown locations.

In addition, operating costs and real estate taxes are well below those in New York and the waterfront area is in a state-designated Urban Enterprise zone, where most corporate tenants pay no sales tax.

Some brokers said that an added factor was that while New York has provided tax incentives to retain major companies, primarily in Manhattan, little has been done to lure tenants to the other boroughs. On the other hand, New Jersey has helped developers with a state program that offers financial incentives to companies relocating or expanding anywhere in the state.

UNDER that program, initiated two and a half years ago, up to 80 percent of the personal income tax revenue generated by each new employee brought on the tax rolls can be returned to the companies for up to 10 years.

''It's a compelling program because it could shave an additional $3 to $5 a square foot per year off rents,'' Mr. Freedman said. As a result, he added, rents on the waterfront could be 25 to 40 percent lower than those for comparable space in Manhattan.

Along with accessibility and affordability Jersey City's waterfront is now also a mature market. Over the last two and a half years some 1,500 new riverside residential units have been added to the thousands that already exist, bolstering the office sector by providing housing to employees and bringing life to the area after the offices close. And the two office towers started last year increased the amount of offices built there to 7.4 million square feet, with a vacancy rate of just 2.3 percent.

''There is a greater critical mass and people like go where there are people,'' said Edwin H. Cohen, an executive director at the East Rutherford office of Cushman & Wakefield, who is handling the leasing at the Newport buildings. ''Most of the users we are talking to are not reluctant brides.''

With the two speculative buildings now rising basically spoken for, available space is shrinking elsewhere along the waterfront.

At the same time, space is tightening along the entire Hudson County portion of the riverfront, which had a vacancy rate of 5.9 percent as of the first quarter of this year. The same is true for midtown and downtown Manhattan, which registered overall vacancy rates 8.3 percent and 9.7 percent, respectively, in the first quarter, according to Cushman & Wakefield.

Just as Manhattan's space squeeze is a boost for Jersey City's waterfront so is the lack of new speculative construction anywhere is the region. While financing to start new buildings is available it is still dependent on finding a tenant. ''This is one of those markets in which cash is king,'' said Mr. Krasnow.

''There are no alternatives, and we have the wherewithal to start a building without tenants,'' said Mr. LeFrak of the Lefrak Organization. ''Jersey City, is a little bit of a field of dreams in that our philosophy is 'build it and they will come.' ''

The market is strong enough to fill another 800,000-square-foot building, he said, adding: ''We're building into an established community and providing a very good mousetrap.''

Asking rents at the Newport Center IV are $30 a square foot a year, plus utilities. Occupancy is scheduled for September 2000.

''Speculative construction is a game of musical chairs,'' said Mr. Stern of Hartz. ''It has to be done at the right time of the real estate cycle and right now we're in the middle of a good cycle.'' He said construction of 70 Hudson Street was expected to begin well before the end of the year.

Photo: Harborside Financial Center model shows what a hotel might look like on pier at left, residences on pier at right. The 350-room hotel will be a joint venture of Jack-Cali, Harborside's owner, and Hyatt Hotels. (Richard Tenguerian/Cubic Dimension) Map of Jersey City, highlighting the Riverfront.